Allergan Profit Dips in Quarter; Revenue Rises
Citing costs from the expansion of its sales force, Allergan Inc. on Tuesday reported first-quarter net earnings of $13.6 million, down 5.6% from $14.4 million for the first quarter last year.
The Irvine-based manufacturer of eye and skin products posted a 9.2% increase in sales to $195.1 million for the three months ended March 31, up from $178.6 million for the same period in 1989.
Jeff D’Eliscu, Allergan’s director of investor relations, said increased sales were offset by higher expenditures related to the expansion of the company’s sales effort, including the addition of a consumer sales force targeting such retailers as pharmacies and grocery stores.
Also, he said, Allergan has incurred higher operating costs because of duplication of its manufacturing activities as the company gradually moves them from Irvine to Puerto Rico and Waco, Tex.
However, D’Eliscu said the Irvine manufacturing unit will be completely closed down soon, and the company should begin to reap cost savings from the move.
Commenting on the first-quarter sales results, Gavin S. Herbert, the company’s chairman and chief executive officer, said, “Sales in the pharmaceutical, surgical and international businesses continue strong.”
But he also noted that “adverse market trends affecting our optical business are continuing, with sales down slightly by 0.4% as compared to the first quarter 1989. These sales were negatively affected, in part, by competitive pricing and product pressures and the ongoing softness in the contact lens market.”
Allergan spokesman Norris Battin said the company is “definitely feeling” the repercussions of a study published in the New England Journal of Medicine last fall that talked about harm done to eyes by contact lenses that are worn overnight.
Battin said that although Allergan primarily sells contact lenses that are meant to be removed and cleaned daily, the adverse publicity has hurt the entire industry.
The company’s sales strategy, company officials said, is to develop new lens disinfection systems and other products to serve existing contact lens wearers.
In addition, they said, the company is moving aggressively into the bifocal contact lens market with the realization that the 18- to 24-year-old group that traditionally bought the most contact lenses is shrinking as the baby boom generation ages.
